Five Blunders that Could Doom Your Start-up Even before it Takes off

The sheer enthusiasm, vigour, and even artificially fuelled excitement-funding-blinds the typical entrepreneur of the planning imperative
Five Blunders that Could Doom Your Start-up Even before it Takes off
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Founder, Inflexion Point
11 min read
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One of the worst advises to be given to an entrepreneur is ‘just do it’, and yet it remains as one of the most offered. There are more upstarts that have doomed by just doing it than those who haven’t. The sheer enthusiasm, vigour, and even artificially fuelled excitement (read funding) blinds the typical entrepreneur of the planning imperative, and, alas, ‘strategy’ remains a laughingstock. No one seems to acknowledge the importance of strategy, citing that the pace is too fast to think, let alone strategize. The old dictum of ‘if you fail to plan, you are planning to fail’ is so apt for start-ups that most entrepreneur miss the point of deep thinking entirely.  

Being a strategy and innovation coach, I often asked “does strategy always work?” The short answer is, no. The mischievous response then is “then why bother?” The real question on strategy is “while a strategy may not always work, but what if you don’t have a strategy and that works?” How do you manage success without a plan? It’s useless, if not counterproductive, for now you can’t replicate success, let alone learn anything from it. A sobering reminder on the strategy and planning imperative is from Larry Page who wrote, “As much as I hate process, good ideas with great execution are how you make magic.” Once again, no marks for great ideas, only execution matters.

This piece is not on execution, but on the question of ‘what’ to execute. Most founders start tasting success when they put more wood behind a few arrows. They focus incessantly on their ‘big hairy audacious goals’, make them known to all and relentlessly chipping towards those 10x transformations. Because excellence can’t be accidental, it calls for planning. Here are five strategic blunders which can shut shop for the high and mighty entrepreneurs. Hopefully, you skirt clean of these cardinal mistakes.

Not knowing or communicating the ‘purpose’ with clarity

Humans are purpose maximisers, and more so, those who are replete with choices. Truth be told, if one isn’t through the lower order needs on the Maslow’s Hierarchy, the needs of physiological, safety and belongingness, purpose remains an elusive pursuit. Here, we are talking about those seeking esteem and self-actualization through the route of entrepreneurship and that’s where a transcending sense of purpose is quintessential.

Simon Sinek observes that customers buy your ‘why’ and not ‘what’, and ditto for employees who believe in your ‘why’ and then the ‘how’ and ‘what’ becomes incidental, or perhaps unincidental. While it’s not necessary to have an absolute clarity on your purpose from day-one, but an inkling of a True North must be there, and it just can’t be about making money. The world-famous Arvind Eye Care started in 1977 with a clear purpose of ‘eradicating needless blindness’, and they are well and truly on it. Nike started with the purpose ‘of bringing inspiration and innovation to every athlete in the world’, interesting defining athlete as anyone with a body (that’s neat).

Can purpose change with time? Yes it can, as in the case of Microsoft which started with the purpose of ‘(putting) a computer in every home and on every desk’, and one it has almost achieved, and is now aiming to be ‘productivity and platform company for the mobile-first, cloud-first world’.  Having a purpose is of supreme importance. And this one purpose must be communicated given every chance a leader or founder has. As LinkedIn CEO, Jeff Weiner, likes to say, “When you are tired of saying it, people are starting to hear it.” So, the number one strategic blunder would be of being unclear on the purpose and, worst still, of having one and failing to communicate it enough. A grand purpose, such as ‘putting a man on the moon’, can encourage creativity, imagination, energies, and expand the envelop for all involved.  

Trying to be everything for everybody

If you talk to a bunch of entrepreneurs early in the game and ask the question, “So, who’s your customer?” Five out of ten times, you might hear “well, it’s everyone who wants to…”. That’s the moment you know that it isn’t going anywhere. The very fact that the customer has a choice (always), and that others are not fools (mostly), there’s no reason that everyone should like you, let alone someone! So, you are better-off starting small and then growing, instead of opening yourself up to unnecessary competition early in the game.

In spite of having the best talent, an unparalleled band equity, and personal courage, it’s the same Steve Jobs who said, “Innovation is saying no to a thousand things.” And that’s where the cornerstone of strategy is ‘choice’. As much as choosing what to do, so as choosing what not to do. Starting small and growing into the adjacencies is how Amazon moved from selling books to selling everything, including computation and storage space at an unparalleled scale. A great brand (read earned trust) enables the firm to expand into newer domains, provided it has established trust in at least one.

India’s Paytm started as a mobile recharge site under the brand of One97, and now sits atop India’s fledging payment ecosystem. That’s the imperative of knowing where to draw your first blood from, even if you move on from there rather quickly. It helps earn trust of customers and employees and helps fend-off competition and substitutes. Once you have earned customer trust, layer by layer you can add offerings, as is the case with Paytm, which has far moved from its original offering to now becoming an integral part of a consumer’s payment system, at least in tier-1 and tier-2 parts of India. That has happened only by being focused, at least to start with.

Chasing the investors, and not the customers 

What’s common across most of the successful companies? I reckon they are close to their customers, and then the money just flows. In the letter to the SEC at the time of listing of Google, Larry Page and Sergey Brin wrote, “(we) founded Google because we believed we could provide an important service to the world, instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority…. We will make business decisions with the long-term welfare of our company and shareholders in mind and not based on accounting considerations.” The letter made it adequately clear to all concerned as to where the priorities of the leaders lie, and eventually the world came to respect it. Ditto for Jeff Bezos, who admits, “We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.”

Most entrepreneurs very naively chase investors believing that if only they had the risk capital they would make a wonderful product, whereas the reality is that investors bet on those who know their customers well, and more specifically the unsolved problems. If you know the customers, money will flow, ideally from the customers, but more certainly from the investors. It’s not just about knowing the customers, but knowing the problems or the opportunities, as experienced and validated by the market. Often, identifying the right market segment remains a thorny issue, and no amount of money can help you discover one. It comes with developing an ability to engage with the market, listen to the articulated and unarticulated needs of the customers, elevating the need to a want and a desire, and finally, knocking the doors of the investors. They can’t refuse then. 

Settling for B-talent, initially

Notwithstanding the genius that Steve Jobs was, he dared dismiss the talent present outside in the world. He noted, “It doesn't make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do”. Jobs knew that once he settles for a B-talent, then the B-talent would only hire a C, leading to a downward spiral. It’s the founding team that decides the fate of the company in an irrevocable manner. If they are A-talent and they mean good for the business, they would hire A-talent, and tolerate their idiosyncrasies, but if they start with B-talent, and then boss around, the death is in sight. A ‘B’ drains the company resources in several visible and invisible ways. They are not as productive or creative, they call for constant nudging and training, they can’t tolerate more competent subordinates or peers, and they lack a general sense of aspiration.

The most common reason sighted for hiring sub-optimal talent is the dearth of good talent in the marketplace. However, you are better off scaling slow and adopting technology wherever possible than being stuck with mediocre talent. The man-machine trade-off is more real than ever before, thanks to affordable and pervasive general-purpose artificial intelligence and industrial automation. As a founder, you are good investing in technology than being stuck with mediocrity, for a mistake in the former won’t be as severe as in the latter. An A-talent would like to work where she can grow, and not where she would be complacent right away, and that’s the kind of environment that you would want for yourself. Little doubt, with over three million applications that Google receives every year, they pick just 0.2%, a stretch well over what it takes to get into Harvard. Hence, Google!

Trying to do it all by yourself

Once you understand the why (purpose), how (working) and what (offerings) of the business, it’s important to understand who would be filling-in the gaps. It can’t be all by yourself, for it would mean stretching yourself too thin. In the Internet economy, where knowledge, capital, ideas, talent, and information are democratized, and the transaction costs are constantly coming down, it is sensible to engage with experts to retain your own expertise. The core competence must be known and retained, and for everything else it’s good to join hands and achieve your objective. 

On the importance of being focused, Apple had scores of partners along the journey of becoming legendary. The likes of Samsung, Hitachi, Seagate, Toshiba, and Foxconn are just to name the most prominent ones, and then there are few more. However, guess who accrues over 50% of the profits? It’s Apple. Apple has emerged to be the orchestrator of innovation, and not the innovator in question. It has retained its razor-sharp focus on design, branding, and retailing, and rest is partnered for. A very clear build-versus-buy-versus-partner decision early in the game goes a long way in not only keeping competition at bay, but also sharpening the axe along the way. For years now, Nike hasn’t been manufacturing much of shoes, or, for that matter, McDonald’s or 7-Eleven haven’t been operating their outlets; they have chosen to focus on what they can do better than others, and in the process grow rapidly.  

This extreme focus also helps investors understand where exactly you are in the value chain or the competitive landscape, and if there’s a potential to be a niche expert. The ensuing intellectual property rights, the associated premium, and ability to attract and retain A-talent are priceless, as demonstrated by Intel where it remained focused on microprocessors for most of 80s, 90s, and 2010s, and not getting into eventually-commoditized computers business.

In summary, strategic choices are important to make and costly to correct, and if at the outset you commit blunders, the corrective course might be way too costly. Knowing the purpose, being focused, being close to the customers, attracting A-talent, and sticking to your knitting could well make the difference between a flying start and a pre-mature crash.

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